Once upon a time per capita GDP of India was higher than China. Now GDP per capita of India is one-sixth of China's GDP per capita. In 2021 GDP per capita of India was $1936 whereas the GDP per capita of China stood at $11188.
There were multiple reasons why China raced ahead of India:
On the other hand, during the same period, India pursued a largely planned economic structure underpinned by a strong element of central direction and a closed-door policy. This approach primarily revolves around protectionism, limited foreign involvement, and heavily regulated domestic enterprises. Consequently, India's economy during this era was marked by a slower pace of growth, with limited opportunities for international trade and foreign direct investment.
In the broader historical context, these contrasting economic policies and the strategies adopted by China and India during the late 70s and early 80s played significant roles in shaping their respective economic trajectories. China's focus on economic liberalization and openness facilitated its spectacular rise as a global economic powerhouse. Meanwhile, India's decision to maintain a planned and closed economy throughout this period had both benefits and drawbacks, ultimately leading to a different pace and pattern of economic development.
Authoritarian vs Democratic Government: China's political landscape is characterized by a centralized, authoritarian regime, wherein the power largely resides in the hands of the ruling party. This structure, marked by limited opportunities for public dissent, often facilitates swift policy decisions and changes. The Chinese government can efficiently push reforms, shape economic strategies, and make high-stakes decisions without the need to extensively negotiate with opposition parties or appease various public sentiments.
Contrastingly, India follows a democratic system of governance, which, by nature, is more pluralistic and inherently complex. The decision-making process in such a framework can often be challenging and protracted due to the necessity of achieving consensus among diverse political parties, regional interests, and social groups. Political decisions need to navigate through various levels of government, opposition critiques, public opinion, and legal scrutiny. This democratic structure, while fostering an environment of political diversity and public participation, might sometimes slow the pace of reforms and policy implementation.
These differing political structures undeniably influence the countries' respective abilities to respond swiftly to economic needs and societal challenges. China's top-down approach allows for rapid policy shifts and efficient decision-making, while India's democratic ethos ensures a more participatory approach to policy-making, albeit at a potentially slower pace. Both systems offer their own unique strengths and challenges, reflecting the complexities of governance in large, diverse nations.
We will leave you with some other charts of real GDP per capita comparison between India and China.
Indian taxation philosophy is primarily driven by the assurance and ease of tax collection. Collecting taxes from certain items (beasts of burden) is very easy for tax collectors and these items assure full tax compliance.